STATEMENT OF COMPREHENSIVE INCOME Revenue 67,472 56,670 132,631 Other income 840 126 1,935 Share of joint ventures net surplus/(deficit) 115 (31) 220 Raw materials, consumables used and other expenses (39,308) (32,976) (77,340) Employee benefits expense (22,729) (18,686) (40,143) EARNINGS BEFORE INTEREST, TAX, DEPRECIATION 6,390 5,103 17,303 AND AMORTISATION (EBITDA) Depreciation and amortisation (1,772) (1,205) (2,987) Finance costs (71) (40) (67) Interest received 213 353 664 NET SURPLUS BEFORE TAXATION 4,760 4,211 14,913 Taxation expense (1,605) (1,324) (4,648) NET SURPLUS FOR THE PERIOD AFTER TAX 3,155 2,887 10,265 Other Comprehensive Income Translation of foreign operations 228 (172) (607) TOTAL COMPREHENSIVE INCOME FOR THE PERIOD NET OF TAX 3,383 2,715 9,658 Net surplus for the period is attributable to: Members of the parent entity 3,142 2,498 9,890 Non controlling interest 13 389 375 3,155 2,887 10,265 Total comprehensive income is attributable to: Members of the parent entity 3,370 2,326 9,283 Non controlling interest 13 389 375 3,383 2,715 9,658 Cents Per Ordinary Share Earnings (attributable to members of the parent entity): Basic 4.2 3.3 13.2 Diluted 4.2 3.3 13.2 Net tangible assets: Basic 76.9 65.9 73.5 Diluted 76.9 65.9 73.5
STATEMENT OF CHANGES IN EQUITY Six Months Ended 28 February 2018 Fully Paid Ordinary Shares Retained Earnings Foreign Currency Translation Reserve Non Controlling Interest Total Balance at 31 August 2017 71,312 28,064 (2,267) 47 97,156 Net surplus for the period after tax - 3,142-13 3,155 Other comprehensive income for the period net of tax - - 228-228 Dividends paid (6.0 cents per share) - (4,481) - - (4,481) Issue of ordinary shares under dividend reinvestment plan 2,557 - - - 2,557 Balance at 28 February 2018 73,869 26,725 (2,039) 60 98,615 Six Months Ended 28 February 2017 Fully Paid Ordinary Shares Retained Earnings Foreign Currency Translation Reserve Non Controlling Interest Total Balance at 31 August 2016 71,312 24,279 (1,660) 669 94,600 Net surplus for the period after tax - 2,498-389 2,887 Other comprehensive income for the period net of tax - - (172) - (172) Dividends paid (5.5 cents per share) - (4,107) - - (4,107) Acquisition of minority interest in subsidiary - 990 - (997) (7) Balance at 28 February 2017 71,312 23,660 (1,832) (61) 93,201 Twelve Months Ended 31 August 2017 Fully Paid Ordinary Shares Retained Earnings Foreign Currency Translation Reserve Non Controlling Interest Total Balance at 31 August 2016 71,312 24,279 (1,660) 669 94,600 Net surplus for the year after tax - 9,890-375 10,265 Other comprehensive income for the year net of tax - - (607) - (607) Dividends paid (9.5 cents per share) - (7,095) - - (7,095) Acquisition of minority interest in subsidiary - 990 - (997) (7) Balance at 31 August 2017 71,312 28,064 (2,267) 47 97,156
BALANCE SHEET As at 28 February 2018 CURRENT ASSETS Cash and cash equivalents 21,682 32,810 26,670 Trade debtors 20,053 13,540 17,833 Other financial assets 419 472 144 Sundry debtors and prepayments 2,429 1,037 947 Inventories 19,214 10,660 16,272 Contract work in progress - - 4,108 Receivable from joint ventures and associates 2,224 1,863 1,909 Plant and equipment held for sale 345-345 66,366 60,382 68,228 NON CURRENT ASSETS Property, plant and equipment 14,071 12,415 14,249 Capital work in progress 254-319 Investment in joint ventures and associates 1,232 890 1,118 Goodwill 29,987 29,911 29,987 Deferred tax asset 90 2,206 969 Receivable from joint ventures and associates - 137 - Intangible assets 10,536 11,873 11,311 56,170 57,432 57,953 TOTAL ASSETS 122,536 117,814 126,181 CURRENT LIABILITIES Trade creditors and accruals 8,680 9,406 16,590 Finance lease liabilities 20 32 30 Other financial liabilities 210 182 1 Employee entitlements 5,323 3,316 4,272 Provision for warranty 1,291 1,096 1,300 Payable to joint ventures 1,167 214 547 Taxation payable 2,152 1,686 3,691 Contract work in progress 3,447 2,310 - Current portion of deferred settlement of intangible asset purchase - 1,066-22,290 19,308 26,431 NON CURRENT LIABILITIES Employee entitlements 1,612 2,067 2,568 Finance lease liability 19 40 26 Non current portion of deferred settlement of intangible asset purchase - 3,198-1,631 5,305 2,594 EQUITY Share capital 73,869 71,312 71,312 Retained earnings 26,725 23,660 28,064 Foreign currency translation reserve (2,039) (1,832) (2,267) Equity attributable to equity holders of the parent 98,555 93,140 97,109 Non controlling interest 60 61 47 TOTAL EQUITY 98,615 93,201 97,156 TOTAL LIABILITIES & EQUITY 122,536 117,814 126,181
STATEMENT OF CASHFLOWS Notes CASH FLOWS FROM OPERATING ACTIVITIES Cash was provided from/(applied to): Receipts from operations 73,307 60,576 126,908 Interest received 213 353 664 Net GST received/(paid) (230) 531 (65) Payments to suppliers and employees (73,547) (49,023) (111,365) Interest paid (71) (40) (67) Taxation paid (2,265) (2,153) (2,668) Net cash inflow/(outflow) from operating activities 2 (2,593) 10,244 13,407 CASH FLOWS FROM INVESTING ACTIVITIES Cash was provided from/(applied to): Purchase of property, plant, equipment and intangible assets (797) (6,790) (12,976) Sale of property, plant and equipment 39 90 337 Advance from joint ventures 305 (306) (293) Repayment of advance to Employee Share Purchase Scheme - - 2 Purchase of business - - (375) Purchase of non controlling interest in subsidiary - (550) (550) Net cash outflow from investing activities (453) (7,556) (13,855) CASH FLOWS FROM FINANCING ACTIVITIES Cash was provided from/(applied to): Repayment of borrowings (18) (15) (31) Dividends paid (4,481) (4,107) (7,095) Issue of share capital under Dividend Reinvestment Plan 2,557 - - Net cash outflow from financing activities (1,942) (4,122) (7,126) Net decrease in cash held (4,988) (1,434) (7,574) Add cash and cash equivalents at beginning of the period 26,670 34,244 34,244 Balance at end of the period 21,682 32,810 26,670 Comprised of: Cash and cash equivalents 21,682 32,810 26,670
1. FINANCIAL STATEMENTS Statement of Compliance The unaudited interim financial statements have been prepared in accordance with Generally Accepted Accounting Practice in New Zealand ( NZ GAAP ). They comply with New Zealand equivalents to International Financial Reporting Standard 34 ( NZ IAS-34 ) Interim Financial Reporting and other applicable financial reporting standards as appropriate for profit orientated entities. Compliance with NZ IAS-34 ensures compliance with International Accounting Standard 34 Interim Financial Reporting. These financial statements have been prepared using the same accounting policies as the previously published annual financial statements as at 31 August 2017. These interim financial statements should be read in conjunction with the policies disclosed in the annual financial statements. 2. NOTES TO THE CASHFLOW STATEMENT Net surplus for the period 3,155 2,887 10,265 Adjustments for non-cash items: Depreciation and amortisation 1,772 1,205 2,987 Net loss/(gain) on sale of property, plant and equipment 6 - (73) Deferred tax 879 (603) 201 Share of net deficit/(surplus) of joint ventures and associates (115) 31 (220) Impairment of net assets (QMT Machinery Technology (Qingdao) Co Limited) - - (936) Add/(less) movement in working capital: Trade debtors (2,220) 2,293 (2,000) Other financial assets - derivatives (275) 1,004 1,332 Sundry debtors and prepayments (1,482) 88 174 Inventories (2,942) 1,683 (3,929) Contract work in progress 7,555 1,173 (5,245) Taxation payable (1,539) (226) 1,779 Trade creditors and accruals (7,910) 1,044 8,228 Other financial liabilities - derivatives 209 (440) (619) Employee entitlements 95 (262) 1,195 Provision for warranty (9) (4) 200 Movements in working capital disclosed in investing/financing activities: Movement in foreign exchange translation reserve relating to working capital 228 (172) (607) Working capital relating to business purchases/amalgamation - - 675 Working capital relating to purchase of non controlling interest - 543 - Net cash inflow from operating activities (2,593) 10,244 13,407
3. CONTINGENT LIABILITIES Payment guarantees and performance bonds 15,068 3,550 7,711 Stock Exchange bond 75 75 75 Rental bonds 265 16 - Maximum contract penalty clause exposure 3,181 2,317 1,501 Payment guarantees are provided to customers in respect of advance payments received by the Group for contract work in progress, while performance bonds are provided to some customers for a period of up to one year from final acceptance of the equipment. Scott Technology Limited has a payment bond to the value of $75,000 in place with ANZ Bank New Zealand Limited in favour of the New Zealand Stock Exchange. The Group has exposure to penalty clauses on its projects. These clauses relate to delivery criteria and are common in international contractual agreements. There is a clearly defined sequence of events that needs to occur before penalty clauses are imposed. 4. SEGMENT INFORMATION 4.1 Products and Services from which Reportable Segments Derive Their Revenues The Group s reportable segments under NZ IFRS-8 are: Australasia Manufacturing Americas Manufacturing Asia and Europe Manufacturing Australasia is reported as a single segment due to the integrated nature of customers, manufacturing, sales and financing activities across New Zealand and Australia. Asia and Europe is reported as a single segment due to the integrated nature of customers, manufacturing and sales activities across Asia and Europe. Information regarding the Group s reporting segments is presented below. 4.2 Segment Revenues and Results The following is an analysis of the Group s revenue and results by reportable segment. For the purposes of NZ IFRS-8 allocations are based on the operating results by segment. The Group does not allocate certain resources (such as senior executive management time) and central administration costs by segment for internal reporting purposes and therefore these allocations may not result in a meaningful and comparable measure of profitability by segment.
4.2 Segment Revenues and Results (Cont) Six Months Ended Australasia Americas Asia & Europe 28 February 2018 Manufacturing Manufacturing Manufacturing Unallocated Total Revenue 47,367 11,381 8,724-67,472 Operating profit/(loss) 7,600 716 254-8,570 Depreciation and amortisation (1,242) (70) (217) (243) (1,772) Share of net surplus/(deficit) of joint ventures 110 42 (37) - 115 Interest revenue 1-1 211 213 Central administration costs and foreign exchange - - - (2,295) (2,295) Finance costs (1) - - (70) (71) Net profit/(loss) before taxation 6,468 688 1 (2,397) 4,760 Taxation (expense)/credit (2,107) (185) - 687 (1,605) Net profit/(loss) after taxation 4,361 503 1 (1,710) 3,155 Six Months Ended Australasia Americas Asia & Europe 28 February 2017 Manufacturing Manufacturing Manufacturing Unallocated Total Revenue 45,091 6,263 5,316-56,670 Operating profit/(loss) 7,202 598 (648) - 7,152 Depreciation and amortisation (825) (76) (121) (183) (1,205) Share of net deficit of joint ventures - (18) (13) - (31) Interest revenue 2 - - 351 353 Central administration costs and foreign exchange - - - (2,018) (2,018) Finance costs (1) - - (39) (40) Net profit/(loss) before taxation 6,378 504 (782) (1,889) 4,211 Taxation (expense)/credit (1,945) (149) 219 551 (1,324) Net profit/(loss) after taxation 4,433 355 (563) (1,338) 2,887
4.2 Segment Revenues and Results (Cont) Twelve Months Ended Australasia Americas Asia & Europe 31 August 2017 Manufacturing Manufacturing Manufacturing Unallocated Total Revenue 99,846 17,055 15,730-132,631 Operating profit/(loss) 19,309 2,068 (509) - 20,868 Fair value gain on purchase of business - - - 936 936 Depreciation and amortisation (2,267) (155) (197) (368) (2,987) Share of net surplus of joint ventures 175 44 1-220 Interest revenue 1-2 661 664 Central administration costs and foreign exchange - - - (4,721) (4,721) Finance costs (4) - - (63) (67) Net profit/(loss) before taxation 17,214 1,957 (703) (3,555) 14,913 Taxation (expense)/credit (5,031) (670) 19 1,034 (4,648) Net profit/(loss) after taxation 12,183 1,287 (684) (2,521) 10,265 Revenue reported above represents revenue generated from external customers. Inter-segment sales were $0.9 million for the six months ended 28 February 2018 (six months ended 28 February 2017: $1.4 million). The accounting policies of the reportable segments are the same as the Group s accounting policies described in Note 1. Segment profit represents the profit earned by each segment without allocation of central administration costs, share of profits of joint ventures, investment revenue and finance costs. 5. FINANCIAL INSTRUMENTS The Group enters into foreign currency forward exchange contracts to hedge trading transactions, including anticipated transactions, denominated in foreign currencies. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured to their fair value. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedging relationship. The Group designates certain derivatives as cashflow hedges of highly probable forecast transactions. Fair value of derivative financial instruments Other financial assets - derivatives: Foreign currency forward contracts held as effective fair value hedges 210 180 1 Foreign exchange derivatives 145 148 143 Foreign exchange collar option derivatives 64 144 - Other financial liabilities - derivatives: Fair value hedge of open firm commitments (210) (180) (1) 209 292 143
5. FINANCIAL INSTRUMENTS (Cont) The Group has categorised these derivatives, both financial assets and financial liabilities, as Level 2 under the fair value hierarchy contained within NZ IFRS 13. The fair value of foreign currency forward exchange contracts is determined using a discounted cashflow valuation. Key inputs include observable forward exchange rates, at the measurement date, with the resulting value discounted back to present values. There have been no changes in valuation techniques used for foreign currency forward exchange contracts during the current reporting period. There were no transfers between fair value hierarchy levels during either the current or prior periods. The fair value of financial instruments not already measured at fair value approximates their carrying value, 6. ACQUISITION OF ALVEY GROUP On 20 February 2018 the Board of Directors approved in principle the purchase of the business assets and intellectual property of Alvey Group, Headquartered in Belgium with associated operations in France, Czech Republic and the UK. Due diligence has been completed and the sale and purchase agreement is currently being finalised, with a target acquisition date of April 2018. The transaction has a value of 12.1 million, subject to final adjustments, and is expected to have a positive impact on earnings from completion. 7. SUBSEQUENT EVENTS On 5 April 2018 the Board of Directors approved an interim dividend of four cents per share with full imputation credits attached to be paid for the 2018 year (2017 interim dividend: four cents per share). The Dividend Reinvestment Plan reintroduced by the Company in 2017 will apply to this payment.